The podcast host is Paula Plant. In her podcast, she shares a lot of insight into the estate industry. With regard to real estate investing for beginners, she gives vital tips that can be applied by newbie investors.
Discovering your Niche Is the First Step for Real Estate Investing for Beginners
When an investor enters the real estate industry, Paula, on episode 4, advices on deciding first which niche of real estate you want to invest in. It could be a rental property, commercial property, and the likes. As far rental property is concerned, residential rental property is one of the easiest for newbie investors. It is quite manageable, and you could wrap your head around it. Paula shares that when deciding to invest in residential rental property, the motivating factor should not be capital appreciation but having a monthly cash inflow. There are two ways that you would make money with such an investment:
- Waiting for the property value to appreciate
- Generating income monthly by renting
The former should not be your motivating factor. The money should come from the monthly cash flow.
There are also classifications of rental properties in terms of:
- Class A
- Class B
- Class C
Class A consists of luxury apartments. With these type of properties, you will get the lowest returns, but you will benefit from qualified clients. Class C corresponds to ghetto apartments, and class B corresponds to those who are in the middle.
If you want to be more financially independent, then rental residential property is the best and easiest way to get there.
Picking Rental Properties
In episode 82, Paula shares on how to pick rental properties and answers three vital real estate questions for real estate investing beginners. The questions include:
- What criteria should one use when shopping for an investment property?
- Does it make sense to buy rental property even when you are a renter yourself?
- If you have property that has a lot of equity, can you use it to buy another rental or get a private loan?
At first, if you have a lot of equity in a property, you can use it to get a cash out refinance loan against it. You do not need to sell the property to get cash out of it.
Paula then advises on one common mistake for newbies in real estate make. Just because everyone seems to do something that does not mean that it is right or the best course of action. This is true especially when people buy their own primary residence before buying a rental property. The reason behind this is that your primary residence is not a commercial investment. In some areas, buying your own property is much expensive. If the price to rent ratio favors renting then, by all means, rent the property and use the differential to buy other investments.
Pick the Best Habits to grow your Wealth
The secret to amassing wealth all depends on your financial habits while investing in real estate. In episode 3, Paula advises the following with regard to real estate:
- Always pay cash for rental properties
- When dealing with properties that have mortgages, always double the principal amount of the payment and round it off to the nearest hundred.
- Strive to increase your savings by 1% every month.
To listen to more insights of Paula with regard to real estate investing for beginners, listen to the Afford Anything Podcast today.